Prices Down, Coverage Up, But is Wireless Competitive?

In the last decade, prices for wireless service have dropped and coverage has improved, but the Federal Communications Commission must gather more detailed information about the industry before it can make a truly informed decision about the state of wireless competition, according to a Thursday report.

In the last decade, prices for wireless service have dropped and coverage has improved, but the Federal Communications Commission must gather more detailed information about the industry before it can make a truly informed decision about the state of wireless competition, according to a Thursday report.

Prices for wireless service have dropped 50 percent since 1999, and coverage has improved. But the biggest change in the last 10 years has been the consolidation of wireless carriers and increased usage among consumers, according to a report from the Government Accountability Office (GAO).

It's possible that existing policies at the FCC have hindered smaller providers from breaking into the market, but the GAO found that the FCC lacks the proper data to draw any solid conclusions.

The GAO studied government and private sources, conducted case studies throughout the country, and interviewed consumers, local and state agencies and officials, and various segments of the industry for its report.

Some smaller carriers and consumer groups told the GAO that "policies for making spectrum available for commercial use, as well as policies governing some essential elements of wireless networks, favor large national carriers, potentially jeopardizing the competitiveness of the wireless industry."

One of those essential elements is something called "special access," which connects cell phone towers to wireline phone networks. Wireless providers must pay to access these networks and connect to the Internet backbone; the more money you have, the more likely you are to be able to connect. To make a true determination, however, the GAO said the FCC needs more information on special access rates.

Another complaint the GAO heard was that early termination fees (ETFs) are keeping customers locked into one provider, preventing smaller carriers from enticing them to jump ship.

The FCC has made an effort to collect more data; something the GAO acknowledged. In August 2009, the agency kicked off a far-reaching examination of the wireless industry, asking stakeholders to submit comments on innovation and investment, the state of competition, and whether or not consumers get enough information from providers to make informed decisions about service.

While this is a good start, more information is needed, GAO said.

"In particular, additional data could help assess the competitiveness of small and regional carriers, as well as shed light on the impact of switching costs for consumers," the report found. "[The] FCC should assess whether expanding original data collection of wireless industry inputs and outputssuch as prices, special access rates, capital expenditures, and equipment costswould help the commission better satisfy its requirement to review competitive market conditions with respect to commercial mobile services."

Rick Kaplan, chief counsel to FCC Chairman Julius Genachowski, said the commission will be taking steps to address the issues discussed in the GAO report.

"We agree with GAO that data-driven analysis of the wireless marketplace is essential for pro-innovation, pro-competition policies," Kaplan said in a statement. "The FCC has taken proactive steps to improve our data and analysis, including collecting new and better data for this year's Mobile Wireless Competition Report. We're pleased that GAO has recognized the need for the FCC to collect more comprehensive data on special access and will soon be taking steps to address many of the issues raised in the report."

In May, the commission irked some in the wireless industry when it refused to say that the wireless industry provided effective competition. Every year, the FCC is required by Congress to deliver a report examining competition in the mobile industry. But this year, rather than draw any firm conclusions about the industry, the commission chose to instead highlight trends in mobile wireless, a move that aggravated mobile providers and consumer groups alike.

CTIA, which represents the wireless industry, said the fact that prices are lower and coverage is better proves "that the U.S. wireless industry is extremely competitive and continues to respond to increasing consumer demand by delivering real benefits for American consumers."

Competition is "fierce" among carriers, CTIA president and chief executive Steve Largent said in a statement. To effectively compete, CTIA urged the FCC and Congress to move forward on plans to allocate more spectrum to the wireless industry.

Sprint said it favored action on special access. "At Sprint, we look forward to the commission taking quick action to fix this broken market," Vonya B. McCann, senior vice president of government affairs at Sprint Nextel, said in a statement. "We urge other carriers  both special access providers and purchasers  to provide additional data to the FCC to bring this proceeding to a rapid conclusion.

"All other wireless carriers are critically dependent on the big two carriers (AT&T & Verizon) for wireline broadband access and transport, and their largely deregulated rates are just too high -- especially in rural areas," said Ed Black, president of CCIA. "The FCC has known of this problem for the past decade, and now it's time for a solution that serves the public interest in advanced and competitive choices for mobile broadband service."

Chloe Albanesius has been with PCMag.com since April 2007, most recently as Executive Editor for News and Features. Prior to that, she worked for a year covering financial IT on Wall Street for Incisive Media. From 2002 to 2005, Chloe covered technology policy for The National Journal's Technology Daily in Washington, DC. She has held internships at NBC's Meet the Press, washingtonpost.com, the Tate Gallery press office in London, Roll Call, and Congressional Quarterly. She graduated with a bachelor's degree in journalism from American University...
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